Articles

Over the last three decades along with the various structural changes that have taken place in the economy, we can say that the face of the low-wage labor market has also changed. It used to be that the low-wage labor market characterized by unskilled labor as perhaps reflected by the percentage of high-school dropouts was extremely high.

Those who oppose regulations of any type, including mandates to pay workers a specified minimum wage, often invoke the language of free markets. In a market economy, the argument goes, individuals should be free to enter into transactions, whether it be for the purchase of goods and services or labor services.

The standard minimum wage model that predicts that increases in the minimum wage will result in lower employment rests on the assumption that workers are nothing more than factors of production. As factors of production, they are simply inanimate objects that are easily interchangeable, either with other similar inanimate objects or more technologically advanced ones.

Amidst the debate over whether the minimum wage really helps those at the bottom or whether it causes more unemployment, we often lose sight of why it was needed in the first place. Today the debate over the minimum wage has become a side show between those who argue that it results in disemployment and those who argue that it benefits the poor.

Among the topics that often rise to the top of the debate in most national elections is just what the proper relationship is between the states and the national government. In other words, has federal authority usurped state sovereignty, or is more federal authority needed because the states are untrustworthy guardians of individuals’ rights? It would appear that the many states that have taken it upon themselves to either adopt their own minimum wages or raise existing ones over the federal have only rekindled the traditional states’ rights v. national authority debate, albeit it in a different form.

The conventional explanation for growing wage inequality is often referred to as the skills-biased towards technical change theory. This holds that with globalization and increased capital mobility, the economy has changed from industrial production to a post-industrial service based economy. The former did not need a greatly skilled workforce, but the latter, being technologically more advanced, did require much greater skill.